Dartmouth College was chartered in 1769 by KingGeorge III. In 1816, over thirty years after the conclusion of the American Revolution, New Hampshire’s legislature attempted to alter Dartmouth College’s charter by giving the Governor of New Hampshire authority to appoint trustees to the board and creating a state board with veto power over trustee decisions—in effect, converting the school from a private to a public institution. The existing trustees filed suit against William Woodward, the newly appointed secretary under the new charter, claiming that the acts of the legislature violated the Constitution. The main issues presented by the trustees’ suit were whether the Contract Clause of the United States Constitution applied to private corporations and whether the corporate charter of Dartmouth College could be changed by the New Hampshire legislature.

Background of the Case

Dartmouth College is one of the nine colonial colleges chartered by Great Britain before the Revolutionary War. The original 1769 charter set forth the purpose and mission of the college and also granted land to the college. The original charter set the purpose and mission of the college to educate Native Americans. In 1816, in response to the college’s trustees deposing the school’s president, the New Hampshire legislature amended the college’s charter. The amended charter placed control of appointing officers and trustees with the governor, appointed new trustees, and changed the name of “Dartmouth College” to “Dartmouth University.”

The Controversy

Trustees of Dartmouth, who were largely Federalists, sued in New Hampshire state court challenging the actions of the Republican-dominated legislature and Republican governor to change Dartmouth College’s charter. The New Hampshire Courts ruled in favor of the governor and legislature.

The Supreme Court Decision

Daniel Webster, an alumnus of Dartmouth College, was selected by the trustees to argue their position before the Supreme Court of the United States. Webster was one of the greatest constitutional scholars of his time, arguing 223 cases before the Supreme Court, earning the nickname as the “Great Expounder of the Constitution.”

Webster argued that the New Hampshire legislature had violated the Contract Clause of the Constitution by passing a law “impairing the Obligation of Contracts.” Article I, Section 10 of the Constitution provides in pertinent part:

“No State shall…pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

Webster and his team asserted that the state legislature through its action had taken property rights from one group and given them to another group, in violation of the Contract Clause. Webster purportedly ended his oral argument with the statement:

“It is, Sir, as I have said, a small college. And yet there are those who love it!”

The Supreme Court ruled in favor of the Trustees by a 5-1 vote. In the decision written by Chief Justice John Marshall, the Court found that the college charter was a contract and that the charter made it clear Dartmouth College was a private entity and not a public one. Marshall’s opinion held that the Contract Clause was drafted to prevent states from taking actions directed at private property, and that the charter of Dartmouth College was a contract between New Hampshire (the successor to the King) and the college, which was protected from legislative interference. Marshall went on to describe the details of how a corporation functions:

A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it either expressly or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression may be allowed, individuality — properties by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs and to hold property without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purpose of transmitting it from hand to hand. It is chiefly for the purpose of clothing bodies of men, in succession, with these qualities and capacities that corporations were invented, and are in use. By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object like one immortal being. But this being does not share in the civil government of the country, unless that be the purpose for which it was created.

Almost two hundred years later, , Justice John Paul Stevens cited some of this language in his dissent in Citizens United v. Federal Election Commission, in arguing that corporations, as artificial entities, did not have the right to invoke First Amendment protections.

Associate Justice Joseph Story in his concurring opinion asserted that a state legislature could insert reservation clauses into corporate charters that would permit the state to amend a particular charter.

Conclusion

The Dartmouth College decision was a landmark one because it imposed a significant constitutional limitation on states’ authority to intervene in and change state charters and contracts. The case significantly strengthened the Contract Clause and encouraged economic growth.

Dan Cotter is a Partner at Butler Rubin Saltarelli & Boyd LLP and an Adjunct Professor at The John Marshall Law School, where he teaches SCOTUS Judicial Biographies. He is also a Past President of The Chicago Bar Association. The article contains his opinions and is not to be attributed to Butler Rubin or any of its clients, The Chicago Bar Association, or John Marshall.